contract law essay

Postal acceptance rule and modern communication

The postal acceptance rule, created in 1818, arguably is not in line with laws on modern communication such as fax, email and e-commerce systems and subsequently attracts much criticism. Each different method of modern communication put before the court seems to be either placed in an equivalent ‘face to face’ instantaneous category or in the tradition ‘at a distance category’ [1] to which different laws apply, when these categories mix it causes unnecessary complexity and confusion. However such a simplistic rule that can be applied to this traditional form of communication enables the law to remain accessible and in the consumers favour.

Law of contract requires a firm offer and acceptance to be in place, this is to ensure that there is surety between transactions and maintains that our country is an attractive on a commercial basis; the communication of acceptance is an important part of this procedure and thus the law regarding it requires transparency.

The postal rule origins and justifications

To discuss the postal rule in light of modern communications, it is first necessary to explore the traditional law concerning offer and acceptance by post. The rule was created in Adams V Lindsell [2] where, through misdirection in the post, the defendants offer was delayed which subsequently caused the plaintiffs communication of acceptance, also by post, to be delayed too. In hindrance of the plaintiffs acceptance, the defendants sold the goods to a third party. The question of law was whether there had be a contract formed before the transaction with the third party had took place or whether, if the offer had not been communicated, the offer had been revoked on the sale of the goods to another. The court decided the former to be the case on the basis that the acceptance was effective at the moment of posting and not at receipt, thus the defendants were in breach of contract. This was reaffirmed by Household Fire and Carriage Accident Insurance v Grant [3] and in more recent cases such as Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelgesellschaft GmbH [4] where it was held that placing a letter in control of the Post Office constitutes a binding acceptance. To the court at the time in Adams the rule seemed practical, if the defendants were not bound by the acceptance until it was received then the plaintiffs shouldn’t be bound until the notice of receipt of acceptance was received by them; subsequently this could continue ad infinitum and it would be impossible to achieve formation of a contract by post (which was the predominant method of communication) [5] . It is also notable that the offeror, when choosing the postal system as his chosen means of communication should understand and bear the risks naturally associated with such a method, such a delayed, damaged or loss mail [6] ; such a observation was made in Henthorn v Fraser [7] , Lord Herschell also held that where ‘it must have been within the contemplation of the parties that.. the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted’,. However, this is not always completely legitimate as the means of correspondence can change during the course of negotiations [8] .

A further explanation suggested by academics is that the Post Office acts as an agent of the offeror, so receipt by the post office constitutes receipt by the offeree. However like Mckendrick [9] points out the Post office has no power to ‘contract on behalf of the offeror’ which somewhat negates the claim.

The postal rule and instantaneous communication

As time has progressed the courts have had to decide whether to the scope of the postal rule can be extended to modern developments in communication, namely instantaneous communication. As electronic methods have progressed, the dispatch and receipt of a message tends to coincide and any law that dealt with the delay between the two, such as the postal rule, seems to be rendered useless or obsolete. It has been held that a telephone conversation is the same as a conversation that is held between two people in the same room so the ‘receipt’ rule applies [10] ; this means that the offeror has to receive communication of acceptance before a contract has been established, this is obviously different to the postal rule in the fact that receipt has to be acknowledged by the offeror. However, there are some instances where the dispatch doesn’t automatically mean acceptance has been communicated.

The telex was brought before the court in Entores Ltd v Miles Far East Corporation [11] in 1955, Lord Denning gives various examples of when an acceptance is communicated or not, he concludes ‘the rule about instantaneous communications between parties is different from the rule about post. The contract is only complete when the acceptance is received by the offeror; and the contract is made at the place where the acceptance is received’. So it seem that the responsibility lies with the offeree to communicate the acceptance effectively before a contract is complete, this is unlike the postal rule as the law is not as in favour of the consumer but seems more practical and just in the sense that the both parties are aware of their position. The justification for this is that instantaneous communication tends to be acknowledged whereas post does not [12] . There is also an assumption that a message of acceptance sent during normal business hours by means of instantaneous communication can be reasonably expected to have been received [13] . However, a problem arises where an instantaneous method is used but the message is not actually instantaneous, Lord Fraser dealt with this problem in Brinkibon Ltd v Stahag Stahl [14] and stated that responsibility and risk was on the person who receives the message if they choose not to man their machines [15] . This was reaffirmed and limited to within business hours by the courts in Mondial Shipping and Chartering BV v Astarte Shipping Ltd [16] where a message sent later on in the day on a Friday was held to only be communicated on the next working day (Monday morning). This seems fair as it is not practical to regard all messages sent at all times as indifferent to face to face communication. The law regarding instantaneous seems to be more concise and fairer than the postal rule, instantaneous methods have been used for many years since the cases above and has had little or no effect on commerce which could be an indicator that it is perceived as just and acceptable by society.

Postal rule and electronic communications

Another problem faced by the courts was the introduction of computers. Contracts created over the internet, for example a CD bought from an online shop, are seen as quite similar to a transaction in a shop. The item on the webpage is seen to be an invitation to treat [17] , the customer then puts the items in there virtual basket and proceeds to checkout where they give there credit card details to the seller, this constitutes an invitation to buy; this makes the transaction ‘analogous to the situation in Pharmaceutical Society of Great Britain v Boots Cash Chemists Ltd’ [18] ’ [19] , the website only then displays a confirmation of order, the acceptance is often only communicated by dispatch of the goods themselves [20] . The contracts between consumers and businesses selling through websites is expressly governed in this way by The Electronic Commerce (EC Directive) Regulations 2002 [21] which implies that the ‘receipt’ rule is effective in internet contracting by stating the order/acknowledgment of the order ‘will be deemed to be received when the parties to whom they are addressed are able to access them’ [22] . The postal rule therefore does not apply as internet contracting is held to be a method of instantaneous communication, the regulations are a form of primary legislation which means parliament preferred the ‘receipt’ rule over the ‘dispatch rule’ in this situation.

The scope of The Electronic Commerce (EC Directive) Regulations [23] does not extend to email, this has caused some problem in defining whether an email is ‘instantaneous’ or ‘non-instantaneous’; and as mentioned above the former is beyond the scope of the postal rule [24] . There is an argument for this from a technical perspective, the average person may regard email as just as instantaneous as a fax or teletex, however an email is not sent directly between the two devices, instead it is transferred through a server. Eliza Mik states ‘email messages are exchanged independent of each other, without establishing a simultaneously contiguous end-to-end traffic path between the contracting parties’ [25] , she states it is technically incorrect to describe Email as instantaneous, thus on this basis surely the postal rule should apply to electronic mail.

A second argument originates from one of the justifications of the postal rule above, as the law states that a person should ‘trust the post’ [26] then surely it would be hypocritical for this not to apply to electronic post. [27] The person has no control over the acceptance once he has pressed send just as if he had put it into a mail box. [28] .

On the other hand, there are also a number of reasons put forward by academics of why the postal rule shouldn’t be extended to email. The main argument regarding the purpose and reasons behind the postal rule when it was created in the 18th Century, namely as it was the only form of communication apart from face-to-face. Deveral Capps points out that in the 21st century there are various methods of instantaneous communication to check that any non-instantaneous correspondence have arrived successfully. A technological advancement to support this comes in the form of message receipts, Fee [29] in supporting the postal rule being applied to email, points out that businesses should take advantage of this service to ensure that messages are received.

In summation, it seems the postal rule is not completely outdated; it can still apply to modern non-instantaneous methods of communication such as email. It was held in a court in Singapore [30] that email is non-instantaneous as messages can arrive in a ‘incomprehensive’ form depending on the ‘protocols’ it is sent through. The case also compares emails that are not yet accessed to mail unopened and subsequently is persuasive that the postal rule should apply to email. The fact that parliament have not legislated on the subject whereas they have given clarity to contracting through websites may suggest that it is their intention for the traditional postal rule of apply [31] . Email is a system that is remarkably similar to post but on a speedier basis, it seems only logical that when email messages between parties are truly instantaneous and direct should the ‘receipt’ rule be considered.